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Tether announced the destruction of 500 million Tether coins (USDT).
The issuer of the cryptocurrency declared this week that "Tether has redeemed a significant amount of USDT from the circulating offer of tokens".
"In line with this, Tether will destroy USD 500m from Tether's treasury portfolio and will leave the remaining USDT (around 466m) in the portfolio as preparatory measures for future USDT issues," the company added.
Tether said that the destruction of the reserve of coins, which is a move that is not often seen in the cryptocurrency space, is in line with the Tether white paper (.PDF).
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The document states that each token is supported by a US dollar on a one-to-one relationship. The support of Fiat believes that the virtual good is a "stablecoin". Tether acts as a reserve for fiat currency, which means that cryptocurrency can not be completely decentralized.
To keep the ratio 1: 1, the white paper says that Tether will send "fiat withdrawals and revoke the corresponding Tethers" if necessary. The steps are described below:
- The user deposits the fiat currency in the bank account of Tether Limited.
- Tether Ltd generates and credits the user's cable account. Ligaments come into circulation. Amount of fiat currency deposited by the user = Tethers amount issued by the user (ie 10,000 USD deposited = 10,000 USD Tether issued)
- Users deal with Tethers. The user can transfer, exchange and store Tether coins.
- The user deposits Tethers with Tether Ltd for redemption in fiat currency.
- Tether Ltd destroys the Tethers and sends fiat currency to the bank account of the user.
"The main concept is that Tether Ltd is the only party able to issue the Tethers in circulation (creating them) or to take them out of circulation (to destroy them)," reads the document. "This is the main process by which the solvency of the system is maintained."
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The currency is distributed on the Bitcoin blockchain through the Omni Layer protocol and is generally intended as a substitute for the US dollar and bank transfers.
As noted by Coin Desk, USDT has started slipping below $ 1.00 since October 14th. Bitfinex, which has a hand in management at Tether, has withdrawn $ 630 million from circulation on October 22 to raise the price.
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The price of the USD is currently in circulation at just under a dollar, $ 0.99.
Speaking with Coin Desk, Bitfinex communications director Kasper Rasmussen said that the Tether is not intentionally downsizing the offer, but rather that the USDT is redeemed "when the amount in circulation exceeds the amount required for example by Bitfinex or Tether to work ".
